NAR_grey_logo-01

3 Tips to Avoid Financing Pitfalls

Scott Newman

By Scott Newman

Many agents forget that barriers to getting deals to the closing table exist in both good and bad markets.  We are seeing a lot of appraisal issues in the Chicagoland area as over-regulation and timidness on the part of appraisers to push values — despite undeniable appreciation — has resulted in many deals dying at the financing stage.

How do you avoid becoming one of the statistics?  Follow my 3 practical tips below…

Know Thy Appraiser

The biggest mistake an agent can make is not meeting the appraiser at the property.

To assume that your appraiser is a true expert on that particular neighborhood, city, property type, etc. is foolish. You know what they say about people who assume!!

You need to be there — both agents should be present, in fact, to show solidarity. Make sure you walk that entire property with the appraiser and give him or her the comparables you feel best reflect the true value of the home.  Also, follow up with them afterwards to make sure things are going smoothly.

Remember, lenders are no longer allowed to speak to the appraiser on their file, so you are the first and last line of defense in making sure someone who’s under-qualified doesn’t blow up your deal .

Know Thy Lender

Do you really know the person responsible for making sure your client’s money is ready on the day of closing?  Far too few agents do a proper job consulting with their clients on the value of using a lender with proven experience and local market knowledge.

As a listing agent, I cannot tell you the number of times that a buyer’s agent told me that they have never even spoken to or e-mailed with their client’s lender, and that they are, essentially, blindly hoping that all is well.

If your client is absolutely adamant about using someone other than the lenders you refer business to, pick up the phone and call this person and make sure they actually did a thorough job qualifying your clients. Continue to follow up consistently through closing to make sure they are on top of things.

Know Thy Client

You need to make sure that your client’s unique financial circumstances jive with what they are trying to buy. For example, if your client only has 10 percent to put down and wants to buy in a co-op in downtown Chicago, then you’re probably out of luck as most want at least 30 percent down.

Imagine the disappointment in your client’s face when they find out that not only can they not buy the home of their dreams, but that you’ve also wasted countless hours of their valuable time by not taking the time to make sure their financials lined up with the realities of the current market.

Remember, just because the market is recovering and appreciating doesn’t mean all the fundamentals of being a good real estate agent should go out the window.  Financing is as difficult as ever and the rules change everyday.  Stay ahead of the curve by being pro-active. You’ll benefit by having more of your deals make it to the closing table.

Scott Newman is the broker-owner of Newman Realty in Chicago. Connect with Scott at www.newmanknowschicago.com or @newmanrealty.

Comments
  1. Chris P

    Good advice about meeting the appraiser at the property. Made that detrimental mistake and still feel my seller’s house was under appraised in late 2012 since in six months 2013 other similar homes in the sub ranged in price increase from $152k to 190k.

    Fha appraiser put the “burden of proof” on me to compare the interior of the homes; after the offers were accepted! Couldn’t get her to budge. Still “stings”. She compared a Short Sale to my seller’s house.

  2. Madeleine Wallace

    How right you are, Scott!! These 3 tips are spot-on. I ALWAYS meet the appraiser at my listings & giving him/her accurate information (comps, list of upgrades) definitely helps to get a realistic value. In our New Orleans market, neighborhoods that are close together can be vastly different, creating havoc with finding comps that are truly comparable to the subject property.
    Your advice to “Know Thy Lender” and “Know Thy Client” would seem to be no-brainers. Truly “financing is as difficult as ever and the rules change every day”, as you said. All I can add is that COMMUNICATION is the key here. Madeleine

  3. MaryEllen Haas

    Great Article!
    Thank you

  4. Great articles.

  5. Tim In Fla

    To “Know That Lender” is to “Know That Appraiser”. I would stay away from lenders who use abusive AMC’s and treat their appraisers poorly. If you had a bad experience before with a particular lender who uses a particular AMC its likely that situation won’t change. My tip is to look for smaller regional lenders who have small “panels” of local appraisers. Like names you recognize, done business with before and have a some local experience. The more local the better. Typically the “panel” managment system pays their appraisers well and allows them enough time to complete assignments. With appraisers now doing double the amount of reporting and paid half as much as they used to the hours in week get really long. Short cuts will be taken. It truly is get what you pay for. So for a $200 or so fee and a 48 hr turn time for appraisers to get their reports done its pretty natural human nature to not “give it 110%”. There is no time or financial incentive to do otherwise.

    That would be the first question I would ask any mortgage originator wanting my loan business. Who do you have to use to assign appraisers ? Keep the good and toss the bad.

  6. Tiffany Davis

    Awesome advice! I am a new Realtor with my first listing. Everything written in this article makes much sense! Thanks so much!

ADD YOUR COMMENT